A former partner of convicted Annapolis lawyer Edward S. Digges Jr. has told a federal jury that he never saw critical pages of financial reports which laid out massive overbilling of a major client, even though he and another partner shared equally in Digges' illicit profits.
James T. Wharton testified yesterday that Digges sent him "four or five pages" of each monthly financial report from their accountants.
But he said Digges withheld critical pages of the reports that showed billings which far exceeded the numbers of billable hours Digges and other lawyers in their firm could have properly charged to clients.
"If I had seen this, I would have recognized that it was way out of line," Wharton said, looking at a 1987 report.
The report showed that Digges, the firm's managing partner and chief rainmaker, had billed clients $981,185 -- a whopping 7,849 hours at a rate of $125 an hour -- in 11 months. That is nearly four times what most law firms legitimately bills their clients in a year.
Wharton testified in a civil jury trial in U.S. District Court here in which St. Paul Fire and Marine Insurance Co. is trying to avoid responsibility for paying $3.6 million in judgments and legal fees against the former law firm of Digges, Wharton & Levin and its former partners.
St. Paul carried the law firm's professional liability policy. But the company claims it should not be liable for the judgments because the law partners knew of Digges' long-standing billing fraud and lied to cover it up when they obtained the policy.
Dresser Industries, Digges' major client, obtained the judgments against Digges, Wharton & Levin, and the firm's senior partners, in a separate lawsuit.
Digges, a nationally prominent products-liability lawyer, was later convicted of mail fraud for bilking Dresser out of $3.1 million on $4.5 million worth of billings in four years. He now is serving 2 1/2 years in federal prison, and was ordered to pay $1 million restitution to Dresser.
Dresser's lawyers are involved in the current trial in an effort to collect the judgments from the insurer. They say it is unlikely the law firm's debt ever will be settled unless St. Paul loses this case.
Wharton, and David W. Levin, the third partner in Digges' firm, are involved in the trial as interested parties. They have claimed repeatedly that they were unaware of Digges' illegal activities until after Dresser challenged his billings and filed its lawsuit in 1989.
In court yesterday, St. Paul's lead trial counsel, Richard McMillan Jr., introduced several accounting reports into evidence to show that the Digges, Wharton & Levin firm billed well over 3,000 hours per lawyer and that the $1 million-a-year income Digges generated for the partnership was extremely excessive.
McMillan also elicited Wharton's admission that his income catapulted from less than $200,000 a year to $1.7 million over three years while Digges was committing billing fraud.
But Wharton said he never questioned the numbers of billable hours in the accounting reports because he never saw the lists that contained lawyer-by-lawyer breakdowns of the firm's income.
"I did not see all the monthly statements and I did not see all the pages in each report," he said.
Digges and Levin are expected to testify later in the trial.